Nurien Software has been making a splash with its demos of virtual characters dressed as fashion models striding down runways in virtual fashion shows. This strategy has helped the company raise $10 million in a second institutional round of funding.

The funding suggests that investors are still excited about virtual worlds. According to market researcher In-stat, virtual worlds are expected to hit 1 billion registered users and $3 billion in revenues by 2012. And since Nurien is aimed at both women and men — not just hardcore gamers — it points to a broadening appeal among a larger audience.

The Seoul, South Korea-based company will use the money to develop its social networking platform with realistic virtual characters, or avatars, that look like much more realistic Second Life characters. The funding came from Northern Light Venture Capital, Globespan Capital Partners, New Enterprise Associates, and QiMing Venture Partners. Nurien raised $15 million from the same players last April.

With the service, users can create avatars and share photos, videos and messages with friends. They can play music and dance games, walk the runways, play quiz games and decorate their own 3-D rooms. It launched a beta version in September in Korea, and international launches are planned for 2009. The company got a lot of publicity at Nvidia’s Nvision event in San Jose, Calif. in August when Nurien chief executive Taehoon Kim showed off the software during a keynote speech with Nvidia chief executive Jen-Hsun Huang.

Competitors include virtual world makers like Second Life, Avatar Reality’s Blue Mars and IMVU. but Nurien hopes that its graphics set the company apart in the increasingly crowded field.